Sign in
TP

Turning Point Brands, Inc. (TPB)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was a strong beat: net sales rose 31.2% year over year to $119.0M, driven by modern oral revenue of $36.7M (+628% YoY, +22% QoQ), and adjusted EBITDA increased 17.2% to $31.3M; gross margin expanded to 59.2% (+360 bps YoY, +210 bps QoQ) .
  • Versus S&P Global consensus, TPB delivered broad beats: revenue +$8.7M above, EPS +$0.36 above, and EBITDA +$2.1M above expectations; the company raised FY25 adjusted EBITDA to $115–$120M and modern oral sales to $125–$130M (both raised) .
  • Zig-Zag net sales declined 10.5% YoY (anticipated), but gross margin improved 210 bps; Stoker’s net sales surged 80.8% and segment margin rose to 60.2% .
  • Catalysts: accelerating modern oral scale, U.S. white pouch manufacturing qualification in 1H 2026, and expanded capital flexibility with $97.5M net ATM proceeds and planned $200M ATM and buyback authorizations .

What Went Well and What Went Wrong

What Went Well

  • Modern oral momentum: $36.7M revenue (+628% YoY, +22% QoQ), now ~31% of company sales; CEO: “Our consolidated third quarter results exceeded expectations… we now expect to qualify our first U.S. white pouch production lines in the first half of 2026” .
  • Stoker’s strength and margins: segment net sales +80.8% to $74.8M; gross margin +440 bps to 60.2% . CFO: gross margin up 360 bps YoY to 59.2%, driven by modern oral mix .
  • Guidance raise: FY25 adjusted EBITDA to $115–$120M (from $110–$114M) and modern oral to $125–$130M (from $100–$110M) .

What Went Wrong

  • Zig-Zag net sales fell 10.5% YoY and 6.1% QoQ to $44.2M (wind-down of Clipper weighed), though segment margin improved and sequential gross profit increased .
  • Elevated SG&A (+50.5% YoY; +10.5% QoQ to $44.5M) on modern oral investments and outbound freight; PMTA costs were $0.5M in Q3 (down from $1.2M LY) .
  • Competitive promotions remain intense; CEO expects promotional environment to stay “healthy” with large competitors pressing conversion; tariff and currency headwinds likely to pressure near-term margins and EBITDA .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Sales ($USD Millions)$90.704 $106.436 $116.634 $118.979
GAAP Diluted EPS ($)$0.68 $0.79 $0.79 $1.13
Adjusted Diluted EPS ($)$0.91 $0.91 $0.98 $1.05
Gross Profit ($USD Millions)$50.395 $59.610 $66.623 $70.427
Gross Margin (%)55.6% (calc from above) 56.0% (calc) 57.1% (calc) 59.2%
Adjusted EBITDA ($USD Millions)$26.755 $27.678 $30.472 $31.345
Adjusted EBITDA Margin (%)29.5% (calc) 26.0% (calc) 26.1% (calc) 26.3%

Note: Adjusted Diluted EPS headline in the press release states $1.27, but Schedule B reconciliation shows $1.05; we anchor on Schedule B and flag the discrepancy .

Segment breakdown

Segment MetricQ3 2024Q1 2025Q2 2025Q3 2025
Zig-Zag Net Sales ($USD Millions)$49.324 $47.265 $47.018 $44.154
Stoker’s Net Sales ($USD Millions)$41.380 $59.171 $69.616 $74.825
Zig-Zag Gross Profit ($USD Millions)$27.324 $25.565 $23.099 $25.386
Stoker’s Gross Profit ($USD Millions)$23.071 $34.045 $43.524 $45.041
Zig-Zag Gross Margin (%)55.4% (calc) 54.1% 49.1% 57.5%
Stoker’s Gross Margin (%)55.7% (calc) 57.5% 62.5% 60.2%

KPIs and balance sheet

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Modern Oral Net Sales ($USD Millions)—$22.3 $30.1 $36.7
MST Sales ($USD Millions)———$27.0
Looseleaf Sales ($USD Millions)———$11.0
White Pouch % of Net Sales6% —26% 31%
Cash and Equivalents ($USD Millions)—$99.640 $109.925 $201.189
Net Debt ($USD Millions)—$200.4 $190.1 $98.8
Total Liquidity ($USD Millions)—$161.8 $176.4 $267.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Millions)FY 2025$110–$114 $115–$120 Raised
Modern Oral Sales ($USD Millions)FY 2025$100–$110 $125–$130 Raised
Effective Tax Rate (%)Go-forward—23–26 New disclosure
CapEx ($USD Millions)FY 2025—$4–$5 (excl. modern oral projects) New disclosure
PMTA Spend ($USD Millions)FY 2025—$3–$5 New disclosure
Dividend per share ($)Q4 declaration—$0.075 payable Jan 9, 2026; record Dec 19, 2025 Maintained
ATM & Buyback Authorizations ($USD Millions)Ongoing—Plan to update to $200 each; no current plans to transact Increased capacity
U.S. White Pouch ManufacturingTiming—First lines qualification targeted 1H 2026 New milestone

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Modern oral scale and brand strategy (FRE/ALP)Q1: $22.3M; guidance raised to $80–$95; strong MST/looseleaf; Zig-Zag in line . Q2: $30.1M; guidance raised to $100–$110; Stoker’s +62.9% .Q3: $36.7M; guidance raised to $125–$130; white pouch now 31% of sales; targeting double-digit category share Accelerating
Supply chain, tariffs, and onshoringQ2: Non-recurring freight costs; tariffs highlighted in margins . Q1: SG&A elevated from ALP-related and PMTA .Onshore manufacturing lines to be qualified 1H 2026; immediate savings on freight and tariffs expected; additive capacity to third-party Mitigation underway
Promotional environmentQ2: Heavy promotions in category .CEO expects promotional intensity to persist; TPB maintained pricing integrity; focus on shelf presence over near-term promos Competitive but strategic
Zig-Zag brand initiativesQ1: Zig-Zag in line . Q2: Zig-Zag net sales down; margin 49.1% .“Zig-Zag for Life” tattoo campaign; Zig-Zag Studio; preparing Natural Leaf Flatwraps launch Reinvigorating brand
Retail shelf allocation and chain accountsQ2: Distribution gains; Stoker’s volume up .Retailers reallocating to modern oral; planogram reviews underway; TPB engaged in large and small chains; shared platforms for FRE/ALP Expanding presence
Regulatory/legal (PMTA)PMTA costs: Q1 $1.6M; Q2 $1.7M; limited product lines subject to PMTA .Q3 PMTA costs $0.5M; still only two product lines subject; no plans for additional PMTAs Lower spend; steady stance
ERP/CRM investmentsQ1/Q2: ERP/CRM costs disclosed in non-GAAP reconciliations .Minimal in Q3; continued focus on sales tools for merchandising Transitioned focus to go-to-market
D2C and loyaltyQ2: ALP strong D2C; Zig-Zag flat seq. .Growing subscriptions and rewards engagement across FRE/ALP Building repeat base

Management Commentary

  • CEO Graham Purdy: “Revenue increased 31% to $119 million… including $36.7 million in net modern oral revenue… We are increasing adjusted EBITDA guidance to $115 million–$120 million… and nicotine pouch sales guidance to $125 million–$130 million… We now expect to qualify our first U.S. white pouch production lines in the first half of 2026” .
  • CFO Andrew Flynn: “Gross margin was 59.2%, up 360 bps year-over-year and 210 bps sequentially… Adjusted EBITDA was up 17%… White Pouch now accounts for 31% of our business, up from 26% in the second quarter and 6% a year ago” .
  • CRO Summer Frein: “We continue to invest in strategic marketing… launched FRE Watermelon… first mover in fruit flavor strength spectrum; Zig-Zag for Life and Zig-Zag Studio relaunch; laying groundwork for Natural Leaf Flatwraps” .

Q&A Highlights

  • Onshoring economics and capacity: Onshoring expected to deliver immediate savings in inbound freight and tariff avoidance at qualification; U.S. capacity will be additive; inventory and capacity are “in a very good position” .
  • Market share and promotions: Company remains bullish; maintained pricing integrity despite “brutal promotional quarter”; focus on shelf presence and measured promos informed by first-party D2C data .
  • Distribution white space and chain accounts: Significant room for expansion; shared platforms for FRE and ALP showing encouraging early results; planograms under evaluation for next year .
  • Guidance vs sequential trajectory: Sequential modern oral revenue may reflect contra revenue (slotting fees) as TPB secures shelf space; expect to discuss gross vs net sales differentials in out quarters .
  • Margin outlook: Stoker’s 60%+ gross margin benefits from D2C mix; expect near-term margin compression from tariffs and freight in SG&A; D2C mix remains favorable .
  • Promotional environment outlook: CEO anticipates continued heavy promotions from large competitors; TPB focused on brand conversion via product features and selective investment .

Estimates Context

MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($USD)$95.754M*$105.427M*$110.247M*
Revenue Actual ($USD)$106.436M*$116.634M*$118.979M*
Primary EPS Consensus Mean ($)$0.6975*$0.7300*$0.6950*
Primary EPS Actual ($)$0.91*$0.98*$1.05*
EBITDA Consensus Mean ($USD)$25.638M*$26.522M*$27.144M*
EBITDA Actual ($USD)$24.981M*$30.126M*$29.277M*

Notes: All consensus and “actual” values in this table retrieved from S&P Global.*

Implications:

  • Q3 revenue beat ($8.7M), EPS beat ($0.36), and EBITDA beat (~$2.1M) vs consensus likely drive estimate revisions higher, particularly for modern oral trajectory and FY25 EBITDA range.*

Key Takeaways for Investors

  • Modern oral is scaling rapidly and is now the primary growth engine; management targets double-digit category share and is investing behind FRE/ALP with demonstrated D2C traction and expanding brick-and-mortar distribution .
  • Margin trajectory should be viewed through mix (D2C elevates gross margin) and accounting (freight in SG&A; contra revenue from shelf wins); near-term compression from tariffs/freight is possible until U.S. manufacturing is qualified in 1H 2026 .
  • FY25 guidance raised for both EBITDA and modern oral sales; liquidity strengthened with $201.2M cash and total liquidity of $267.8M, plus planned $200M ATM and buyback capacity—providing flexibility to fund growth .
  • Zig-Zag sales softness is largely expected given portfolio focus and Clipper wind-down; margin improvement suggests healthier mix and pricing; brand initiatives may stabilize/drive engagement .
  • Promotional environment likely remains intense into 2026; TPB is holding price where possible and focusing on assortment and shelf presence—expect disciplined, data-driven promotional investments .
  • Watch for disclosures of gross vs net modern oral sales to parse contra revenue impacts and for updates on planogram outcomes and chain wins over the next two quarters .
  • Tactical: Near-term stock moves are tied to sustained modern oral beats and continued guidance raises; medium-term thesis hinges on onshoring execution and achieving durable double-digit share in a potentially $10B category by decade-end .